Wednesday, June 27, 2012

Schaeffer's Research on Molycorp and Chesapeake Options (MCP; CHK)

Chesapeake is up 4% at $17.76, Molycorp is up 2.18% at $20.58.
From Schaeffer's Investment Research (June 26):

Speculative investors have taken a keen interest lately in rare earth oxide specialist Molycorp, Inc. (NYSE:MCP - 19.98), natural gas giant Chesapeake Energy Corporation (NYSE:CHK - 16.84), and semiconductor stock Skyworks Solutions, Inc. (NYSE:SWKS - 24.90).
Calls have become the options of choice on MCP, while puts are in heavy
rotation on CHK and SWKS. Here's a closer look at the latest trends in
the options pits for these three hot stocks.

Over the past five days, options traders have bought to open 16,410 calls on MCP,
according to data from the International Securities Exchange (ISE) and
Chicago Board Options Exchange (CBOE). Meanwhile, a relatively meager
3,541 puts have been bought to open, netting the stock a five-day
call/put volume ratio of 4.63. In other words, speculators have scooped
up nearly five times more bullish bets than bearish during the past
week.

From a longer-term perspective, MCP sports a 10-day call/put volume
ratio of 3.32 on the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). This ratio
ranks higher than 76% of other such readings taken during the past year,
suggesting that speculators have purchased calls over puts at a faster
pace just 24% of the time.

However, options traders may not be as optimistic as they appear.
Despite a 7.2% decline during the most recent reporting period, short
interest still accounts for a lofty 35.8% of MCP's float. With so many
bears betting on the stock to slide, it's possible that skeptics have
been buying call options simply to hedge their shorted shares.

MCP has been a serious laggard on the charts, having plummeted to a
loss of 63.7% over the previous 52 weeks. The shares are trading below
familiar resistance at their 10-week and 20-week moving averages, and
they're now at risk of breaching tenuous support in the $20 area. A
definitive break of this psychologically significant level could spur
additional selling in MCP.
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On the other side of the options aisle, put players have set their sights on long-suffering CHK.
Traders on the ISE have bought to open 8,473 puts on CHK during the
past five sessions, nearly doubling the 4,315 calls that were purchased
in the same time frame....MORE